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Politics

Did the savings balance the cost?

Jeb Bush's push to privatize cut costs. But it also suffered from scandals.

By JONI JAMES
Published December 30, 2006

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Gov. Jeb Bush's revolutionary approach to running state government was fairly simple: If you could open the Yellow Pages and find a private company doing something government did, maybe government shouldn't do it.

Taking a cue from corporate America, where outsourcing is often commonplace, Bush sought to bring marketplace efficiencies to state government with a robust effort to privatize many state services. In the process, Bush eliminated more than one-in-10 state jobs, even as the state budget and Florida's population continued to balloon.

Bush's administration says through the privatization effort, 48 different competitive contracts have saved taxpayers a total of more than $2-billion.

But in applying free-market dynamics to Florida's government, Bush's march toward privatization never quite overcame the human variable.

For every success Bush can point to - cheaper Florida Lottery overhead, better third-party Medicaid collections - there has been an embarrassing misstep and sometimes corruption.

And undermining the privatization push is a stunning lack of information about how well it has performed in the past eight years. Audit after audit, including some from Bush's own inspector general, concluded that the savings or other benefits of such private deals were often impossible to deduce because the contracts written early in Bush's administration lacked clear parameters.

Gov.-elect Charlie Crist has been noncommittal about whether he'll continue Bush's bold experiment. And Florida's Senate has said it plans to take a hard look at the state's contracts.

Will Bush be known for revolutionizing the operation of state government or just for taking it on an eight-year detour?

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Nowadays, Florida's toll roads use private companies to collect tolls. Public safety officials use a statewide communications network financed partially by private dollars. Applicants for state jobs apply through a third-party vendor.

And foster children may never meet a state social worker, but rather ones from local community agencies with whom the state has a contract.

"The notion that the organizing principle of government is the size and scope of the government itself is not relevant to me," Bush said recently. "It's what's the best way to provide services."

Bush is far from the first politician to embrace privatization. His predecessor, the late Democratic Gov. Lawton Chiles, laid the groundwork for outsourcing the state's foster care system, privatized some prisons and endorsed a proposal to create charter schools financed with public dollars.

What was different when Bush took office in 1999 was the depth of his conviction that government could run better as a contractor. That conviction, and the scope of the effort he launched because of it, made him a national trailblazer.

"I would say he has accomplished more over past eight years than any other administration in the country," said Jack Furney, a former Bush staffer who now is deputy director of government reform for the Reason Foundation, a nonprofit, libertarian-leaning group dedicated to free markets.

"He took chances and thought outside the box. He wasn't afraid to consider things, to take some risks. I think those things have paid off tremendously for taxpayers," Furney said.

But Furney also acknowledges there were mistakes.

The state employees charged with overseeing these multi-million-dollar deals often were ill-equipped to deal with their corporate counterparts, Bush's own inspector general found in 2003. And self-interest, the compelling force in market economics, sometimes infected state employees, too. Two state agency heads resigned in disgrace over having too-close relationships with their vendors.

The money vendors pumped into the political process also fueled claims from Democrats and state employee unions that the entire system was a way to increase campaign donations to the Republican Party of Florida.

Bush has denied the claim, saying contracts were awarded on merit.

"It all depended on who you had in charge," said one of the state's most vocal privatization critics, state Sen. Nancy Argenziano, R-Dunnellon, whose 13-county district encompasses a slew of state workers.

"When he outsourced it to the right agency heads who had accountability, it worked well," she said. "When he didn't, they gave it away. No accountability. No safeguards a normal contractor would have."

Bush responded in 2004 by creating a Center for Efficient Government to train state employees involved in private contracts and to lend expertise in contract writing and vetting.

"We've learned as we've gone forward. I think everyone realizes we have room for improvement," said Bush's management services secretary at the time, Bill Simon, one of six to hold the post under Bush's tenure.

But it wasn't enough to stave off problems already cooking at various state agencies. Over his final two years in office, Bush suffered through an onslaught of negative news about his administration's outsourcing programs.

In July, Corrections Secretary Jim Crosby pled guilty to felony charges for accepting kickbacks in exchange for getting a friend hired by the commissary vendor.

This was a painful revelation because the Bush administration had boasted for years about the success it had in outsourcing the prison commissary system.

Crosby's downfall came after a particularly difficult 2005.

The rollout of Bush's most ambitious single contract, handing over all state personnel functions to private company Convergys, went terribly.

The company repeatedly stumbled in cutting paychecks for state employees or accurately providing employee benefits.

Compounding the controversy were allegations that a Convergys' subcontractor shipped state employees' personal information to India for data processing.

"We don't have people who know how to negotiate a contract or monitor a contract," said former state Sen. Walter "Skip" Campbell, D-Tamarac, who has questioned if Bush's outsourcing meant state work was being done overseas. "And you can't privatize the stuff without having some accountability."

Also in 2005, Bush's social services secretary, Jerry Regier, and two of his subordinates resigned after acknowledging they took favors from lobbyists.

In another case, state investigators found it reasonable to believe that a contract employee working at the State Technology Office might have used insider information to help her company win a $126-million contract for technology services. Bush's team canceled the contract and rebid it.

Despite those troubles, Bush succeeded in December 2005 in pushing through an ambitious plan to outsource the management of Medicaid benefits. Leery lawmakers limited the plan to a pilot program in Broward and Duval counties.

Bush makes no apologies for what he has tried, saying his system has done more for taxpayers than the public sector system he inherited.

"I think every aspect of delivery of services should be challenged. ... Outsource if appropriate, insource if appropriate," Bush said this month.

"That goes against the conventional thinking in this state's capital. We just have a different point of view."

Gov. Jeb Bush ends his second and final term in office next week. The St. Petersburg Times is spending three days examining the office and policies he leaves behind.

Today

Florida led the nation in turning government jobs over to private contractors, but spotty record-keeping and a string of scandals make it hard to evaluate Bush's trailblazing privatization policy.

Coming Sunday

From the FCAT to school vouchers, Bush spent more time and energy on public education than anything else. He changed the system, but did he improve it?

On the Web

To read the first story, about how Bush changed the office of the governor, go to links.tampabay.com

Outsourced opportunities

A sampling of Gov. Jeb Bush's outsourced contracts:

Leasing agent: The Department of Management Services in 2003 hired a subsidiary of the Staubach Co. to negotiate leases with private landlords for state offices. Founded by football great Roger Staubach, the company has earned more than $14-million in commissions. DMS says the company has saved the state $81-million in rental costs.

Human resources: In 2002, Convergys Corp. won its first major government contract to take over Florida's personnel services - from processing employee applications to cutting paychecks. The enormous task of unifying personnel systems for all state agencies helped make this an ongoing headache.

Medicaid reimbursement: Medicaid administrators in 2001 hired an outside firm to recover money from insurance companies if they were financially responsible for services provided to Medicaid clients. Bush's office says it has led to $427-million in savings for state and federal governments, which share the cost of Medicaid.

Law enforcement radio: In 2000, Bush signed a 20-year contract to finish a long-delayed radio system to link public safety officials statewide. M/A-Com was hired to build and maintain the system in exchange for annual fees totally $352-million. At the end of the contract, the state can purchase the system for $1. Officials say it never failed during the 2004 and 2005 hurricanes.